The IRS Criminal Investigation Division’s Power and Authority

The Internal Revenue Service’s Criminal Investigation Division, or IRS CI, is a scary powerful agency. They have a ton of authority to investigate and prosecute federal tax crimes. But they also face limits on their power from laws and regulations.

IRS CI’s main job is to enforce criminal violations of the Internal Revenue Code. This means they investigate and build cases against people who commit tax fraud, tax evasion, and other financial crimes related to taxes. They are the only federal agency that can investigate these kinds of crimes.

What Laws Give IRS CI Power?

The main law is Title 26 of the United States Code, also called the Internal Revenue Code or just the tax code. The tax code has lots of sections that define various tax crimes and penalties. Some of the most common tax crimes IRS CI goes after are:

• Tax evasion – When someone intentionally tries to avoid paying taxes they owe, usually by hiding income. This can include not reporting cash income, inflating deductions, hiding money offshore, etc. Tax evasion is a felony with up to 5 years in prison and fines up to $250,000 for individuals.
• Filing a false return – Purposely providing false or fraudulent information on a tax return. This includes claiming fake deductions or exemptions. It is a felony with up to 3 years in prison and fines up to $250,000.
• Identity theft – Using someone else’s identity to file a fraudulent tax return and claim a refund. IRS sees tons of stolen identity refund fraud. It can result in up to 15 years in prison and fines up to $250,000.
• Employment tax evasion – Businesses that intentionally fail to pay payroll taxes for their employees. This deprives the government of Social Security, Medicare, and income taxes. It can lead to up to 5 years in prison.

So the tax code gives IRS CI broad authority to pursue all sorts of tax cheats – from everyday Americans fudging a few deductions to mobsters hiding millions offshore. IRS agents can investigate any suspected violation of the tax code.

Investigation Power

IRS CI has expansive power to investigate suspected tax crimes and build cases. Some of their specific investigation tools include:

• Obtaining and reviewing tax returns, bank records, business records, etc. No search warrant is required.
• Issuing administrative summons to compel testimony and obtain records from suspects and third parties like banks.
• Interviewing suspects and witnesses.
• Conducting surveillance operations.
• Working undercover to infiltrate criminal operations.
• Obtaining and executing search warrants.
• Making arrests and seizing assets obtained through illegal activity.

With this broad authority, IRS CI can dig deep into a suspect’s financial life to build their case. They don’t need to prove a crime up front – just a reasonable suspicion one may have occurred. This gives them leeway to cast a wide net.

Prosecution Power

After completing an investigation, IRS CI decides whether to criminally prosecute a suspect. They have sole power to prosecute tax crimes in federal court. Most cases are referred to the Tax Division of the Department of Justice to handle the prosecution.

If IRS CI refers a case for prosecution, it typically results in:

• Criminal trial in a U.S. District Court
• Plea deal negotiated by federal prosecutors
• Sentencing and penalties if convicted, such as prison, fines, restitution, and asset forfeiture

IRS CI also has authority to investigate financial crimes beyond pure tax cases if they relate to tax administration. For example, they may pursue money laundering, cybercrime, and organized crime cases with a tax component.

Limits on Power

While IRS CI has expansive authority, they also face some limits on their power:

• They can only investigate violations of the tax code, not other federal crimes.
• Administrative summons can be challenged in court if improper.
• Warrants are required for searches, seizures, and arrests based on probable cause.
• Taxpayer confidentiality rules limit what information they can share.
• Prosecutions must meet the high burden of proof “beyond a reasonable doubt.”

There are also important taxpayer rights and protections that apply during IRS CI investigations, such as the right to legal counsel, the right against self-incrimination, and due process requirements.

Oversight and Accountability

While IRS CI has broad powers, they don’t operate unchecked. There are various forms of oversight and accountability built into the system.

Internally, IRS CI agents must follow policies and procedures documented in the Internal Revenue Manual. Violations can result in disciplinary action. All investigative activities are reviewed by supervisors.

Externally, IRS CI is accountable to:

• Department of Justice – Reviews investigations and prosecutes cases referred by IRS CI.
• Federal Courts – Approve and oversee warrants, summons, trials, sentencing, etc.
• Congress – Oversees IRS activities and budgets funding.
• Treasury Inspector General for Tax Administration – Investigates allegations of misconduct.

So while IRS CI is very powerful, they don’t have unlimited, unchecked authority. Oversight aims to ensure accountability and prevent abuse of power.

Recourse for Taxpayers

Dealing with IRS CI can be intimidating. But taxpayers under investigation do have rights they can exercise.

If you’re under investigation, it’s recommended to:

• Hire an experienced tax defense attorney or CPA to represent you.
• Remain silent and don’t answer questions without your representative present.
• Negotiate with prosecutors for a favorable plea deal if you wish to avoid trial.
• Challenge any improper summons or warrants in court if necessary.
• Petition for a reduction in penalties or sentencing if convicted.

While IRS CI is powerful, they still have to follow the law and respect taxpayer rights. By understanding your rights and seeking qualified representation, you can navigate the process.